Now more than ever, a comfortable retirement depends on secure, stable investments. Unfortunately, the right stocks for retirement won't just fall into your lap. In this series, I look at 10 measures to show what makes a great retirement-oriented stock.
You won't see SYSCO Corporation (NYSE:SYY)'s name on restaurant menus or ballpark concession stand billboards. But as the largest food-services and distribution company in the country, Sysco is responsible for delivering much of the you eat away from home. But can the company maintain its impressive leadership in the industry? Let's revisit how Sysco does on our 10-point scale.
The right stocks for retirees With decades to go before you need to tap your investments, you can take greater risks, weighing the chance of big losses against the potential for mind-blowing returns. But as retirement approaches, you no longer have the luxury of waiting out a downturn.
Sure, you still want good returns, but you also need to manage your risk and protect yourself against bear markets, which can maul your finances at the worst possible time. The right stocks combine both of these elements in a single investment.
When scrutinizing a stock, retirees should look for:
With those factors in mind, let's take a closer look at Sysco.
| Factor | What We Want to See | Actual | Pass or Fail? |
|---|---|---|---|
| Size | Market cap > $10 billion | $19.2 billion | Pass |
| Consistency | Revenue growth > 0% in at least four of five past years | 4 years | Pass |
| Free cash flow growth > 0% in at least four of past five years | 3 years | Fail | |
| Stock stability | Beta < 0.9 | 0.69 | Pass |
| Worst loss in past five years no greater than 20% | (23.5%) | Fail | |
| Valuation | Normalized P/E < 18 | 15.33 | Pass |
| Dividends | Current yield > 2% | 3.4% | Pass |
| 5-year dividend growth > 10% | 6.6% | Fail | |
| Streak of dividend increases >= 10 years | 43 years | Pass | |
| Payout ratio < 75% | 58.7% | Pass | |
| Total score | 7 out of 10 |
Source: S&P Capital IQ. Total score = number of passes.
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